PetroCanada Backs Oil Sands Despite Royalty Increases

Higher royalties in Alberta will not hurt the “overall viability” of Petro-Canada oil sands projects, but some planned investment in conventional oil and gas in the province will be affected, CEO Ron Brenneman said yesterday.

“At least at this point [the oil sands] still look like pretty solid projects and I think that’s because for the most part we’re dealing with very high-quality resources. … They’re the ones that should survive in the new royalty regime,” Mr. Brenneman said at the company’s investor day in Edmonton.

Last month, Alberta said it will increase royalties across the board by a total of 20 per cent, aiming to collect $1.4-billion more in 2010, with higher rates coming into force in 2009. These increases will mean that some exploration Petrocan might have carried out will be “no longer economic.”

It was the second time in two days that a major oil company has said it would chop spending in Alberta. Canadian Natural Resources Ltd. said that it is slowing down its plans to develop the oil sands, declaring the era of “megaprojects” over.